Back
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, D.N. RAY, JJ.
Jambuwala Commodities Private Limited - Petitioner
Versus
Income Tax Officer - Respondent
Special Civil Application Nos. 2488, 2499 of 2022
Decided On : 10-03-2025
(A) Income Tax Act, 1961 - Section 147 and 148 - Reopening of assessment - Notices issued for Assessment Years 2013-14 and 2014-15 challenged on grounds of vagueness and lack of specific reasons - The Assessing Officer's reasons were deemed vague and non-specific, failing to establish a rational nexus between the transactions and the alleged escapement of income. (Paras 3, 7, 8)
(B) Jurisdiction - The court emphasized that the Assessing Officer must provide clear reasons for reopening assessments, and vague reasons do not justify the exercise of such powers. (Paras 7.1, 7.4)
Facts of the case:
The petitioner challenged notices issued under Section 148 for reopening assessments based on alleged fictitious profits from transactions with Affluence Commodities Pvt. Ltd., which the petitioner argued were mischaracterized as escapement of income. (Paras 3, 4.8)
Findings of Court:
The court found that the reasons recorded by the Assessing Officer were vague and did not demonstrate any independent satisfaction regarding the escapement of income. (Paras 8, 9)
Issues: The main issues included whether the reasons for reopening assessments were sufficiently specific and whether the Assessing Officer had formed an independent opinion.
Ratio Decidendi: The court ruled that the vague and non-specific reasons recorded by the Assessing Officer rendered the reopening of assessments invalid, emphasizing the necessity of clear reasoning in such administrative actions. (Paras 7.1, 9)
Result: Notices issued under Section 148 quashed and set aside.
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms.Vaibhavi K. Parikh for the petitioner and learned Senior Standing Counsel Mr.Varun Patel for the respondents.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Varun Patel waives service of notice of rule for the respondents. With the consent of learned advocates for the respective parties, the matter is taken up for final hearing, as the issue involved is very short.
3. By these petitions, the petitioner had challenged the impugned notices dated 31st March, 2021 issued under Section 148 of the Income Tax Act, 1961 (for short “the Act”) for the Assessment Years 2013-14 and 2014-15 on the ground that the reasons recorded for reopening for both the Assessment Years are vague and incorrect.
4. For sake of convenience, Special Civil Application No.2488 of 2022 is treated as a lead matter for recording of the facts.
4.1 The petitioner - Company entered into various loan transactions with one M/s. Affluence Commodities Pvt. Ltd. during the previous year relevant to Assessment Year 2013-14 and earned interest income of Rs.1,99,000/-. The aggregate amount of transactions between the petitioner and the said Company at the end of the year was Rs. 14,03,19,900/- .
4.2 The petitioner filed return of income for the year under consideration on 26.09.2013 declaring total income of Rs.23,88,130/- .
4.3 The case of the petitioner was selected for scrutiny and notice dated 08.07.2015 was issued under Section 142(1) of the Act including the details of interest paid/ received with rate of interest as per Point No. ‘xxiii’ of the said notice.
4.4 The petitioner by letter dated 16.07.2015, furnished the details as called for and categorically stated that the petitioner has received interest of Rs.1,99,000/- from one party.
4.5 The Assessing Officer passed the Assessment Order dated 29.12.2015 under Section 143(3) of the Act accepting the return of income filed by the petitioner.
4.6 It is case of the petitioner that by notice dated 25.02.2019 issued under Section 133(6) of the Act, the petitioner was called upon to furnish the various details in relation to transactions with Affluence Commodities Pvt. Ltd. which was replied by the letter dated 1st March, 2019 whereby, the petitioner provided the Annual Accounts, Bank Statement, ledger & confirmation of the said Company including the Assessment Order passed under Section 143(3) of the Act by the Respondent.
4.7 The petitioner thereafter received the impugned notice dated 31.03.2021 under Section 148 of the Act seeking to reopen the case of the petitioner for the year under consideration.
4.8 The petitioner filed return of income in response to the impugned notice with a request to supply the copy of the reasons recorded for reopening which was supplied to the petitioner along with the notice dated 11.11.2021 issued under Section 143(2) read with Section 147 of the Act and reads as under:-
“In this case, Information was received from the ACIT, Central Circle-2(3), Ahmedabad vide letter No.ACIT/CC-2(3) Information/ 2016-17 dated 16.02.2017 that the assessee has received fictitious profits in Equity/ Derivaties trading on BSE by trading penny stock Affluence Commodity Private Limited of Rs 14,03,19,900/-. Many evidences were seized from the search premises which prove that the transactions with various entities were used just for the sake of fictitious profits/loss in Equity/ Derivaties trading for/ to the different beneficiaries. Thus, in view of plethora of evidences in the form of seized evidences and also admission of various persons u/s 132(4) of their involvement in providing Bogus accommodation entries/ fictitious profits/ loss in commodities to pass on required benefits to various beneficiaries, it became clear that there was organised systematic business of tax evasion involving beneficiaries and passing through entities for fictitious profits/loss in Equity/Derivaties trading on BSE.
The necessity for clear and specific reasons in reopening assessments under the Income Tax Act is paramount; vague reasons do not justify such actions.
Reopening of assessment under the Income Tax Act requires tangible new material; mere change of opinion is insufficient.
The Assessing Officer must independently verify information before reopening assessments; reliance on third-party information without application of mind invalidates the reopening process.
The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment.....
It is a settled position of law that reopening of case under Section 147 of the act, after expiry of 4 years, cannot be justified unless the income chargeable to tax has escaped assessment by reason ....
It is a settled position of law that reopening of case under Section 147 of the act, after expiry of 4 years, cannot be justified unless the income chargeable to tax has escaped assessment by reason ....
The Assessing Officer must have tangible evidence linking the taxpayer to alleged income escape for valid reassessment under the Income Tax Act; mere suspicion is insufficient.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
